Money And Banking

Step 1: Understanding the role of RBI.
The Reserve Bank of India (RBI) is referred to as the 'lender of last resort' because it provides emergency funding to financial institutions that are facing liquidity crises and are unable to secure funds from other sources. This is a critical function in maintaining the stability of the financial system.

Step 2: Conclusion.
Thus, the RBI's role as the 'lender of last resort' ensures that it can provide financial support to institutions in times of crisis, preventing the collapse of the banking system.

Step 1: Understanding SLR.
SLR stands for Statutory Liquidity Ratio. It is the minimum percentage of a commercial bank's net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets such as cash, gold, or government-approved securities. This ratio is set by the central bank, i.e., the Reserve Bank of India (RBI) in India.

Step 2: Conclusion.
Thus, SLR is a requirement that banks must fulfill to ensure liquidity and control credit expansion.

Step 1: Understanding High Powered Money.
High Powered Money, also known as Base Money or Reserve Money, refers to the total currency in circulation in the economy, including the currency held by the public and the reserves held by commercial banks with the central bank. It is the money that the central bank uses to control money supply in the economy.

Step 2: Conclusion.
Thus, High Powered Money forms the foundation of the monetary base in an economy, which is used by commercial banks to create credit.